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More Evidence That Medicaid Expansion Makes Fiscal Sense for States

January 29, 2014 at 4:32 PM

BY

January Angeles

Armed with new data, Virginia’s Medicaid agency estimates that adopting health reform’s Medicaid expansion — which it originally estimated would cost the state $137 million through 2022 — would actually save the state more than $1 billion over that period. That echoes what we’ve said all along: expanding Medicaid is a good deal for states.

Opponents of the Medicaid expansion have often cited flawed studies that exaggerate its cost to states, such as by assuming that newly eligible Medicaid enrollees would be much sicker (and thus more expensive to cover) than current enrollees. Analysis shows the opposite is true: non-disabled adults who newly enroll into Medicaid are more likely to be healthier than those who are already enrolled.

Virginia’s Department of Medical Assistance Services (DMAS) now agrees. Looking at new data and other states’ experience with recent Medicaid expansions, DMAS found that uninsured adults who newly enroll into Medicaid would likely have the same, if not lower, costs than currently enrolled adults.

DMAS also significantly raised the estimate of how many uninsured people would newly qualify for Medicaid under an expansion. This means Virginia would have to spend even less to reimburse hospitals for uncompensated care for the uninsured than under the earlier estimate, since more of the uninsured would have Medicaid. And, the drop in Virginia’s uncompensated care costs through 2022 would more than offset Virginia’s cost of covering newly eligible Medicaid beneficiaries over that period (in part because the federal government will reimburse 100 percent of the cost of covering these new enrollees through 2016), producing a net saving for the state.

States that have not expanded Medicaid can’t keep ignoring the fact that expanding Medicaid has significant benefits for states.